When Should Uncertain Nonpoint Emissions Be Penalized in a Trading Program?

David Hennessy and Hongli Feng

American Journal of Agricultural Economics, 2008, vol. 90, issue 1, 249-255

Abstract: When nonpoint source pollution is stochastic and the damage function is convex, intuition might suggest it is more important to control a nonpoint pollution source than a point source. Earlier research has provided sufficient conditions such that the permit price for a unit of ex-ante expected emissions should be higher than the permit price for a unit of certain emissions. Herein we provide a set of necessary and sufficient conditions such that this is the case. An approach to testing for the validity of the condition set is available, and has been applied to a related problem. Copyright 2008, Oxford University Press.

Date: 2008
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Working Paper: When Should Uncertain Nonpoint Emissions Be Penalized in a Trading Program? (2008)
Working Paper: When Should Uncertain Nonpoint Emissions be Penalized in a Trading Program? (2007)
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